Shifting Monetization Models Without Sacrificing User Loyalty with ClassPass CMO Joanna Lord

Jul 10, 2017

ClassPass CMO Joanna Lord talks with Mobile Growth about the risks associated with shifting monetization models, and how not to alienate your existing loyal customers in the process. Also discussed are split testing UA campaigns, and using your mobile app to keep their live users engaged!

Mobile Growth: We’re here with Joanna Lord, CMO of ClassPass. Joanna, how are you doing?

Joanna: I’m good, thanks!

Mobile Growth: So to kick us off, can you tell us a little bit about your career trajectory, and how you ended up as the CMO of ClassPass?

Joanna: I’ve been with ClassPass just over a year now. Prior to that I was out in Seattle – ClassPass is here in NY – I made the bicoastal move, I was out in Seattle working with a similar model company, another marketplace in the home improvement space called Porch. And prior to that, [I was at] another startup, so [I’m] a seasoned startup marketer if you will, where I kind of focus on performance and growth and brand. And as I’ve worked through the different companies I’ve been with, I’ve settled into companies that have the marketplace dynamic, have a B to C and a B to B play, and companies that are super excited about investing in a brand and building a community around a product. All of those things lined up to get me here at ClassPass today.

Mobile Growth: Please tell us a little bit about the ClassPass product, a little bit about the business, and what the offering is.

Joanna: ClassPass is just about a four-year old company now, based out of NYC. We’re a fitness membership that allows you to try different boutique studios in your area so you can go to yoga, you can go to barre and boxing and strength training without the traditional limitations of a gym membership. And we’re in 39 cities around the world, with some international locations as well, so it’s a really fast growing company of fitness enthusiasts, just looking to live an active lifestyle.

Mobile Growth: That’s awesome. So ClassPass semi-recently changed their pricing model and their offering, why was that, did it help business, and what did you learn from that?

Joanna: Yes, we did – in fact last year was a big year for us. We approached a couple of different price changes and we were trying to make our legacy product of unlimited work, and we had seen that some of the economics of it weren’t going to work long term. We talked a little bit about this publicly when we did it, but the way the unlimited model was set up it actually had it rooting against our customers getting to class, and we’re all about getting the customer to class, and we want them to book reservations and get the fitness experience. So we ended up introducing some capped plans early on in the year, and we wanted to see if we could make those plans as exciting and as delightful for customers as the unlimited plan was, and they did great. We saw that people were excited to try, you know, a five class pack, and that worked well for people that were getting started with studio fitness. And then we introduced a ten class pack for those that are maybe a little bit further along on their fitness experience. I think the excitement and energy around those packs and the growth around them helped validate that we could take this change and sunset the unlimited product. So we did that later in the year, and brought the customers along with us; and we took many of those customers and ended up putting them on a ten pack. We also introduced to markets some abilities to add classes, things like bundles, and add classes as you wanted to go more. So it was a year-long thing, really. It was a real intentional choice the business had to make, and it left us with this product portfolio where, no matter where you are in your fitness journey, like early to it or later in life, we have a product that works for you. So definitely a challenging change for any business but one that we felt confident doing, and it’s just worked out well for us.

Mobile Growth: So your existing customers or users, you didn’t grandparent them in to keep the unlimited, you switched them over to the new model?

Joanna: We did, yes. In fact we talked a little bit about it and many of the customers came along with us; we actually only lost about 5% of users during that transition, which we’re really proud of, I think it speaks to the quality of our studio partners and the experience itself. But we did move them to this new product that works for the business so we can build the right product for them on a plan that’s economically viable for our business. So now all of our attention is on product and features and value and we’re not trying to work things around to make it work at the price point it was at.

Mobile Growth: Awesome. So you say that that’s obviously helped your business in the short term as well as the long term, or was there a little bit of a hiccup that you were prepared for in the short term?

Joanna: You never want to lose a customer right? And I think we all…even 5% on such a significant change to a business, and sunsetting a product that so many people love, that still hit all of us hard, that hurts, but I think we definitely feel like we’re in a stronger place for it. And now it’s all guns blazing, looking forward, and we’ve been able to, again, bring those customers along and they’re still very happy with ClassPass and high NPS’s, and loving classes, and that’s all we can hope for.

Mobile Growth: What has been your most successful UA channel to date for ClassPass?

Joanna: The growth of ClassPass has been really exciting – I was very lucky, I’ve been here just over a year, but there’s been a lot of things that have worked in our favor. One of the most successful channels we’ve had is word of mouth and referral channels. ClassPass is a product that when you use it, and you go to a class, you get so much joy out of it, you really love the experience. We have a ton of five-star rated experiences on the platform, so you tell your friends about it. We’ve really played to that referral strength. We have a really great refer-a-friend program that stood up in all of our cities, we also have a really exciting invite-a-friend, where you can actually bring someone to class with you for free. So both of those channels and just the power of word of mouth, candidly, have definitely been strengths of our ClassPass brand.

Mobile Growth: How much split testing would you say that ClassPass does in any given campaign?

Joanna: Quite a bit. One of the reasons I was attracted to ClassPass was, we have a really deep appreciation for experimentation and, you know, some companies say that, but they only run a couple of tests now and then. But we’re running tests and experiments across all different levers. We run it up front, on the website, we run it on messaging and advertisements, we run it on onboarding and email series. Anytime we launch a new feature product we’re doing hold-out audiences and testing lift of different feature adoption and things like that. So any campaign that’s running, whether it be a going-to-market for a product or an acquisition campaign across the channel, there’s going to be some component of AB testing or some component of experiment versus control.

Mobile Growth: That’s great that you test so much because I think that’s actually one of the biggest problems that I see not just in mobile but in business and advertising in general, there’s just not enough diverse testing and data analysis to optimize your efforts.

Joanna: And it’s hard because you know, it’s an upfront investment, right? You have to invest in the analytics that you’re collecting, you have to invest in the dashboard or tools that make those analytics servable to the teams, they have to be able to see these front-end insight dashboards, and then you actually have to pause and look at the data, help it inform your next choice, which changes the way you sequence and launch different campaigns or products. But for us, we’re very fortunate, we have a remarkable pricing team in-house that brings a lot of those skills to the company. We also have a CTO that has come from leading companies that had testing at the heart of their culture, like Amazon and Microsoft. We’re pretty lucky that that came in early and it was almost like a non-negotiable. It’s assumed that any launch, whether it be a campaign-specific featured product, is going to have some testing validation built in, and built in early.

Mobile Growth: Since ClassPass relies on the customer experience and retention’s obviously huge for ClassPass — I would say even more so than for other companies — what are some of the best retention and reengagement strategies that have worked for ClassPass to keep the users interacting with the app and keep them going and using your product?

Joanna: We have so many different things that we do, and you’re totally right, I think for a company that’s been well known for growth — I always think of growth as three levers, it’s acquisition, it’s retention, and it’s monetization. We’ve focused a lot on that retention piece and serving the customer; once they’ve offered to give us a chance, we know that we have to earn their loyalty. So one of the things we’ve done is get really clear on what is the value of ClassPass, and to us it’s not just getting them in the app or doing a search or even booking a class, but it’s getting them to show up at the actual fitness class, take it, and then hopefully they’ll rate it a 5. I think we do a lot to make sure that we’re keeping an eye on classes attended, and we’re introducing and keeping the momentum. When someone signs up for ClassPass, they raised their hand and were like, I want to try studio fitness. So we consider it our job to get them excited about that first class and get them to that first class, which can be hard because it can be a scary experience, if you’ve never tried boxing or fitness or you haven’t gone to that gym yet, and the first time you try it it’s on ClassPass. So I think we focus a lot on early life, the first five or ten days, how can we get them excited about that first class get them booked and get them in it and then can we make sure that they’ve had a great experience. And if they haven’t, to your point, there’s a lot of opportunity for us there, we can reach out, what went wrong with the class, or ‘hey, here are a couple of classes you might want to try’…’we noticed you haven’t booked your first class’. It’s really getting them into that studio and having that great experience with our partners. I’d say we obsess over it, we obsess across product and marketing and pricing, it’s really about getting them to have that first experience and love it.

Mobile Growth: Do you do any push notifications when new partners come up, or in their area, or anything new comes up that you would ping them and say, ‘hey we just added a new boxing gym in your area, try them out’, or anything like that?

Joanna: Yes, with the push notification piece, we are actually about to launch what you just spoke of. We were a little bit late to capture an audience to opt our users in to push, mainly because we really focus on the core booking and searching experience to start, that was all of last year. What kind of plans that we have as a company is all about making sure that we were getting the customer to the right product. Now what we have been doing is, we’ll send an email introducing you to new studios that have joined the platform. We invested a lot of time last year in to building a personalized home screen experience so when you log in, you are launched in what we call the home card. You see your upcoming classes, your friends’ upcoming classes, classes that you previously went to that you might want to try again, and/or classes that are like the classes that we know you’ve rated highly. So we’re investing a lot into that personalized algorithm to make sure that the right classes’ merchandise be with the right time. To your exact point, we know that it’s our job to include discovery as a part of that experience, but we also know that a lot of our customers want to habituate and go to some of those classes time and time again as the weeks roll by. So we’re constantly balancing those two needs from our customers, and we merchandize the right class to them at the right time.

Mobile Growth: So talking about UX and UI, you did mention that you just changed a home screen. When you make a change to something like that, do you roll it out to a certain percentage? What’s your strategy there for ClassPass, or do you just do your QA, QC, and just go with it all?

Joanna: Great question. I feel so lucky, I feel like I’m taking credit for our amazing product team right now, but it’s pretty dialed in. We do a great deal of QA and QC of course, but we also tend to roll out features to employees first, so we can make sure that things work cross device. We’re all ClassPass users, we definitely want to eat our own dog food and try it, so we definitely do that, and we tend to roll out market by market. That is what we did with the home card experience. It was a fundamental change, we actually moved the navigation dock to the bottom and we changed the placement of some of the key features like favorites. There was a lot bundled in this release, we launched to a small set in one market, and then exposed to the full market, and then rolled out to some subsequent markets. And only when we feel we’ve dialed this in, we feel really good, do we open it to the full network. But we take our time, we definitely don’t rush to these releases, we want to make sure that the experience is rolled out properly, and goes out in a really compelling way.

Mobile Growth: As many frustrated users would agree with me, we all wish that more companies would take that approach.

Joanna: It’s hard when you get a feature and then there’s a bug.

Mobile Growth: Then your reviews plummet, and there goes a lot of other factors, right?

Joanna: Exactly.

Mobile Growth: So, staying with engagement, let’s move on to the next question. What are some of the effective ways you’ve re-engaged some of your lapsing users?

Joanna: So we think of lapsing in two ways, I’ll speak a little bit to both of them. We look at it as, you can be on the platform and be paying us as a subscriber but possibly go dormant, that’s one degree of lapsing. We spoke a little bit to this, but our job is, how can we get them excited about fitness again? I mean, fitness is a very volatile commitment, like sometimes you have time for it, sometimes your heart’s in it, sometimes you’re not. Sometimes you’re injured, or you’re on the road a lot. We spend a lot of time making sure that we’re, again, reminding them of the classes they love, getting them back in to make a search, showing them those new studios, maybe telling them there’s friends that they have that are on the platform and they might want to see those schedules. So any moment where we can bring them back into the app is great. But the bigger category of re-engagement is obviously return users. If a customer decides the ClassPass isn’t right for them, how do we get them back on the platform. We’re so lucky because we have a really high reactivation percentage and a huge percentage of it is organic. Part of that is because again, studio fitness is kind of a volatile commitment, like some seasons you’re in it, and some seasons you’re not. So you come back to ClassPass when you’re ready for that commitment again, and we do that through reminding you of new features, showing you new products, reaching out to remind you again of the classes you enjoyed. Sometimes we do it through promotions and getting you back in the door so you can recommit yourself. There’s a lot of different tactics we use, but it’s a really viable channel for us. 8 out of 10 people that have left ClassPass say they plan to come back to ClassPass in the upcoming six- to twelve-month period. So we have a lot of interest in coming back to the brand, once you’ve decided that your fitness goals have changed.

Mobile Growth: Do you change your messaging and engagement style to fit certain core demos or psychographics, or do you just have your own brand communication style and you use that same voice to all of your customers?

Joanna: That’s such a great question. I think it’s a little bit of both, we do have a voice as a brand, we’re mature in that sense that we have a brand guide, we have a tone, we have these four characters we believe that we play at any given time. Sometimes we’re your coach, sometimes we’re your friend, sometimes we’re an expert, so I think we do have that. But to your point about personalized communication, we absolutely focus on that as well. Our ESP is powered and connected in a way that I can speak to people that were on the ten pack differently than I can speak to someone that was on the five pack and I can speak to someone who loves yoga differently than I can speak to someone who maybe loves strength training and boxing. And I think we do try to bring in that layer of personalization, it’s what consumers expect and it’s what we owe them when we’re trying to re-engage them with the product and brand.

Mobile Growth: Right, someone who’s maybe in their 20’s would be potentially voiced differently than someone who’s 45-50.

Joanna: Exactly. And I think for us, we’re learning so much about our customers, the introduction of the five class pack and the ten class pack last year really broadened our addressable market. We see there’s older women demographics on our market, and there’s more men in our audience, and I think we’re trying to understand how they would want to be talked to, and what they want to understand and get out of our product as well.

Mobile Growth: So, everyone has their standard KPIs that everyone tracks. But for you and your business, and ClassPass, what do you think are the most important KPIs to track and pay attention to. And, as a follow up secondary question, what numbers means success to you? How do you know you’ve achieved success when you’ve tracked those KPIs?

Joanna: Great question. Some of them are the traditional ones, like we care deeply about NPS here. And we consider it a true north. Do our customers love our experience, and to the earlier question about knowing the word-of-mouth and referral channels are such a powerful advantage ClassPass has, and we’re so thankful for it, so we want to make sure that we never lose that. The second thing is classes attended and booked reservations. We’re a booking platform, and the more classes we can get booked, the more our partners are happy, and we’re a marketplace so that’s really important to us. A metric we really care a lot about that’s core to our value proposition is discovery. We know that if we introduce you to a new studio that you didn’t know of before and you give it a 5 star rating your lifetime value with us is going to go up, and you’re going to be happier, and NPS is going to be happier, and your referrals are going to go up. So we’re thinking a lot of, how are we going to merchandise new experiences to keep discovery alive. And then recently we’ve really built in the yin to that yang, which is the ability to habituate. So we have features that help you get to a class 3 or 4 times in one month, and we’ve recently introduced a feature that allows you to do that, where you can actually top up and go to a class you really liked, a fourth or fifth time, in any given month period. So we’re going to look at that, as a key metric to the business, because we know that the ideal class ClassPass user, the happiest user, has a balance between routine and discovery. So those are all things that we look at, obsess over, hourly if you will. What is success for us, we do keep the bar super high, like even on NPS. We track ourselves against lifestyle brands and tech lifestyle brands which we could benchmark ourselves against as a SAS business, which would traditionally be a lower NPS, but we shoot for the moon and keep our benchmarks very high. I can’t share any of the specifics but, what is success for us tends to be the upper echelon, like we do try to say, let’s be excellent at this and not just good.

Mobile Growth: Has ClassPass tested any emerging channels for growth, and if so, which ones work the best?

Joanna: So that’s a huge part of our strategy. I feel very lucky because we still have so many channels that we’re standing up, and that’s going to make for an exciting year for us, but we have a lot of the traditional channels that you would expect a consumer/business to have. We’ve done well with referral, we’ve done well with paid social, and we’ve invested a lot in organic recently. We have a really great SEO opportunity in front of us so we’re investing a lot there. As it relates to emerging channels, we’re constantly testing it, so I actually have someone on my growth team that focuses on emerging channels and partner opportunities. So, we’re looking at — some of it’s out of home, some of it is radio or audio, and some of it is digital platform buy-ins. We recently launched an affiliate program that’s doing exceptionally well. We’re always trying to stand up new channels; some of them work, some of them don’t, but again when you have a brand and a product that’s just so valuable, we feel that we have a lot of open green in front of us. So we’re constantly testing new channels and hiring against them as they unlock.

Mobile Growth: Thank you very much for your insights, this has been a great interview. I’m sure people will get a lot from it and I really appreciate you taking the time that you spent with us to answer all of these questions.

Joanna: Of course, and thanks so much for having me, this was fun!